Going back to the Marshall Plan after World War II, the U.S. has spent substantial sums and energy to rebuild war-torn countries. The Hutchins Center on Fiscal and Monetary Policy and the Center on the U.S. and Europe asked four experts to identify lessons relevant to Ukraine, particularly for donor countries, from the Marshall Plan, South Sudan, Afghanistan, and Iraq. Here’s a summary of their answers and videos of their full remarks at the December 15, 2022 event, which also included a report on Ukraine’s economy and the way to finance, govern, and organize reconstruction.
The Marshall Plan: ‘The key is to identify the bottlenecks’
Harold James, Claude and Lore Kelly Professor in European Studies at Princeton University, discussed the connections between the crisis Western Europe faced after World War II and the crisis Ukraine faces now. He emphasized that while the U.S. provided necessary funding to Western Europe through the Marshall Plan, the American government paid nowhere near the full cost of reconstruction. The U.S. never spent more than 3% of GDP on the Marshall Plan, and most Western European countries received Marshall Plan funds worth only between 3% to 10% of their GDP. Instead, the administrators of the Marshall Plan identified and covered the costs of two key resources which Western Europe needed—foodstuffs and machinery—and these resources jumpstarted reconstruction efforts. James argued the same principle should apply in Ukraine: “What [Western governments] can do,” he said, “is trigger specific bits of reconstruction, and the key to doing that is to identify the bottlenecks.” While the bottlenecks post-WWII were in agriculture and manufacturing, James pointed to the energy and technology sectors as parallel challenges for Ukraine. Investing in these crucial sectors, in combination with debt relief and further economic integration with Western Europe, would allow donor countries to contribute significantly to Ukraine without paying for the full cost of damages incurred during the war. He added that while there was a real question in the 1940s as to whether Germany could be democratic, there is no need to teach Ukrainians lessons about democracy and democratic values.
South Sudan: ‘Without political and diplomatic attention, a development partner will not have impact’
Brian D’Silva, a retired consultant for the U.S. government who did extensive work in South Sudan, argued that reconstruction efforts often overlook important political factors on the ground. In the case of South Sudan, ethnic divisions, regional conflict, and corruption stymied many developmental efforts. D’Silva advocated for investments in infrastructure, agriculture, and natural resources, but cautioned against providing funding blindly. The U.S. provided over $4 billion in assistance for developmental and humanitarian assistance to South Sudan before it was independent, and several Western and Northern European nations joined. Yet South Sudan fell into a continuing civil war in 2013, only two years after gaining independence in 2011. Without transparency and monitoring, the funding got redirected away from intended uses and put into the hands of corrupt officials who enriched themselves. It also was directed to the capital, Juba, rather than distributed around the country. Existing military leaders, rather than the youth and women in the country, made away with most of the gains, as few processes existed to hold recipients accountable. “The focus has to be on institutions and on supporting a new generation of leaders who prioritize their own communities, rather than getting rich at any cost…” he noted. “We need to have both a political conflict lens and a technocratic lens,” he advised those planning efforts for Ukrainian reconstruction.
Afghanistan: ‘Promise less, deliver more’
Naheed Sarabi, a visiting fellow in Brookings’s Global Economy and Development program and the former deputy minister for policy in Afghanistan’s finance ministry, warned that international development programs tend to overpromise. Even with 70 international donors on board after reconstruction began post-9/11, the reconstruction of Afghanistan missed many of its key targets, largely as a result of overly ambitious plans, Sarabi said. While some health and education indicators improved from very low starting points, crucial sectors like agriculture and infrastructure saw meager improvement, and Afghanistan remained reliant on international aid. “International assistance to Afghanistan suffered from short-termism and unpredictability,” she said. To achieve fast results, international donors relied on foreign funding and international aid groups within the country, rather than building up national institutions, and this undermined government legitimacy. The Afghan government became more accountable to international donors who had provided financing than to its own people, billions of dollars intended for development leaked out through inefficiency and corruption, and many promises were broken. Sarabi’s advice for multilateral coordination efforts: “Less ambitious plans. As our motto went in the last years of the Afghan Republic, promise less, deliver more.” Further, Sarabi emphasized the importance of donor coordination and country ownership of development efforts. As the West looks towards reconstruction financed by a large set of international donors, it is crucial that Ukraine plays a central role in its own economic development, and that the donors who make it possible are on the same page.
Iraq: ‘Private finance, as well as public finance, is essential.’
Hideki Matsunaga, Director General of the Middle East and Europe Department of the Japan International Cooperation Agency (JICA) and a former adviser to the World Bank on the Middle East and North Africa, argued that private sector investment is essential not just for the reconstruction of Ukraine, but for the long-term health of its economy. “In Iraq, the most critical shortcoming was that reconstruction failed to diversify the Iraqi economy away from the dominant oil sector. As a result, few economic opportunities were created in the non-oil private sector.” Matsunaga argued that private sector involvement is the safest bet for lasting gains for ordinary people within Ukraine, and for creating a large range of job opportunities. While the private sector has the capacity to invest in the Ukrainian economy, as it stands, the risks are very high. Matsunaga thus called for the international community to “de-risk private investment,” explaining, “The resources required for physical infrastructure development are so great that private, as well as public, finance is essential.” On the public finance side, he emphasized the importance of donor coordination. “In Iraq, reconstruction became a set of disparate projects rather than a national enterprise, in part because each donor oversaw projects for which it was providing funding,” he said. In Matsunaga’s view, low-risk private investment, in combination with strong donor coordination for publicly financed projects, will be necessary for Ukraine going forward.